It may be the new ‘battleground’
And this pattern may be playing itself out in other marketplaces; wherever intermediaries serve both end-user customers and service provider suppliers. It’s that part of the market tagged (with the misnomer*) SME and in the UK corporate travel marketplace, battle is about to be joined.
Or is it? Bear in mind ‘herd-mentality’ doesn’t just occur in financial markets – and look where that got us.
However, even before this week’s Business Travel & Meetings Show took place at Earls Court, where FCm UK launched ‘Corporate Traveller’ ~ a rejuvenated brand aimed squarely at the SME business travel customer, there have been other indications of renewed efforts to focus more specifically on this loosely labeled part of the market. In September 2009 HRG, joint-ranked No. 2 in the UK marketplace and another global travel management company, announced its SME proposition and showed off its ‘Simply HRG’ brand with a new and dedicated web site. And just ahead of the aforementioned trade show, American Express Corporate Travel (joint-ranked No.2 in the UK**) announced it was re-naming/refreshing/re-launching (pick whichever you think fits best) its SME offer branded as ‘AXcent’.
Some may see this flurry of activity as an almost inevitable and cyclical reaction to the recent economic recession. It’s happened before; where the big (and now global) players struggle because a recession forces their equally big (and now global) clients to cut back on travel. And of course, when sales/transaction volumes go down (a dip of 20-30% during 2009) with such wafer-thin margins for travel management companies, so too does their income. But arguably, even in recessionary times, SME businesses who are the ‘little-guys’ still have to travel to sell or service their customers, and without any kind of volume spend they need help to hunt down the best deals.
Equally, there have been many travel industry commentators declaring that this recession (unlike previous downturns) is different. It has forced a fundamental step-change in corporate attitudes towards travelling on business. So the argument goes; CSR response to global warming, the use of virtual meeting web-based technologies and commercial pressures to minimise travel spending more than ever, all have caused a paradigm-shift ~ you don’t have to travel to do business globally anymore.
Maybe it’s true. Or perhaps a version of it is true. If you work for a global organisation, maybe the new paradigm is ~ you don’t have to travel so much to do business globally anymore.
Which neatly brings us back to the future. I suggest that the renewed focus on SME customers is occurring partly because of the recession, but partly because this kind of business customer with perhaps fewer travellers or travelling less often, needs a different kind of service proposition. One where value is driven by expertise and the ability to find and put together an itinerary featuring the best deals available on the day faster than the customer can themselves. Yes it’s harder to find and keep this kind of customer, but with a different cost base they generate better margins per transaction and healthier profits for travel management companies.
And it’s what the business travel agency service was originally all about.
* The definition of what a Small to Medium Sized Enterprise looks like seems to be open to interpretation – for example, some global travel management companies would classify an organisation spending £500,000 as an SME. Whereas for a small or mid-market agency, that kind of customer would probably be treated as one of their top-tier clients. And it’s not just the agencies that might risk misaligning client expectations. Airlines equally categorise clients by their total annual spend even when that spend is a small share of a client’s multi-million pound travel budget. The client may have a ‘mega-corp’ culture and expectations but they will be presented with an SME offer. In today’s complex world, SME is as descriptive as saying someone works in the ‘Travel Industry’ or the ‘Public Sector’. It could mean so many different things that it’s not actually that helpful.
** Market Rankings – according to Buying Business Travel 50 leading TMCs May/June 2008.
Just Barry's Blog 